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2012 (5) TMI 569 - SUPREME COURTRecovery of bank dues - Liability of guarantor - Held that:- In view of the provisions of Section 128 of the Indian Contract Act, 1872, the liability of the guarantor/surety is co-extensive with that of the debtor. Therefore, the creditor has a right to obtain a decree against the surety and the principal debtor. The surety has no right to restrain execution of the decree against him until the creditor has exhausted his remedy against the principal debtor for the reason that it is the business of the surety/guarantor to see whether the principal debtor has paid or not. The surety does not have a right to dictate terms to the creditor as how he should make the recovery and pursue his remedies against the principal debtor at his instance. - In case the property is disposed of by private treaty without adopting any other mode provided under the statutory rules etc., there may be a possibility of collusion/fraud and even when public auction is held, the possibility of collusion among the bidders cannot be ruled out. In The State of Orissa & Ors. v. Harinarayan Jaiswal & Ors., AIR 1972 SC 1816, this Court held that a highest bidder in public auction cannot have a right to get the property or any privilege, unless the authority confirms the auction sale, being fully satisfied that the property has fetched the appropriate price and there has been no collusion between the bidders. Therefore, it becomes a legal obligation on the part of the authority that property be sold in such a manner that it may fetch the best price. Thus essential ingredients of such sale remain a correct valuation report and fixing the reserve price. In case proper valuation has not been made and the reserve price is fixed taking into consideration the inaccurate valuation report, the intending buyers may not come forward treating the property as not worth purchase by them, as a moneyed person or a big businessman may not like to involve himself in smallsales/deals. - there must be an application of mind by the authority concerned while approving/accepting the report of the approved valuer and fixing the reserve price, as the failure to do so may cause substantial injury to the borrower/guarantor and that would amount to material irregularity and ultimately vitiate the subsequent proceedings. - law requires a proper valuation report, its acceptance by the authority concerned by application of mind and then fixing the reserve price accordingly and acceptance of the auction bid taking into consideration that there was no possibility of collusion of the bidders. The authority is duty bound to decide as to whether sale of part of the property would meet the outstanding demand. Valuation is a question of fact and valuation of the property is required to be determined fairly and reasonably. Recovery of the public dues must be made strictly in accordance with the procedure prescribed by law. The liability of a surety is co-extensive with that of principal debtor. In case there are more than one surety the liability is to be divided equally among the sureties for unpaid amount of loan. Once the sale has been confirmed it cannot be set aside unless a fundamental procedural error has occurred or sale certificate had been obtained by mis-representation or fraud. - No fundamental procedural error had been pointed out which would vitiate the order of confirmation of sale and issuance of sale certificate. Auction sale stood vitiated and all the consequential proceedings are liable to be quashed. However, for the reasons best known to the appellants, they have neither impleaded the Bank (creditor) nor any of the legal heirs of Ganga Prasad (principal debtor). In such a fact-situation, it becomes difficult to proceed with the case any further. - The courts below have rejected the case of the appellants only on the ground of delay. Nothing had been pointed out before us as to on what basis the aforesaid judgment and orders warrant any interference. In view of the above, the appeal lacks merit and is accordingly dismissed. However, the appellants may move an application before the Collector, Banda/concerned authority, in case the excess amount had not been paid to them, for recovery of the same. If such an application is filed and the authority comes to the conclusion that excess amount had not been paid to them, it shall be refunded within a period of 3 months from the date of making the application with 9% interest. - Decided against assessee.
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